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W3177: Enhancing the Competitiveness and Value of U.S. Beef

Statement of Issues and Justification

The U.S. beef industry is facing a number of complex challenges that can be addressed through a multi-disciplinary, integrated approach involving participants from animal science, meat science, and economics. Increasing exports, decreased cattle numbers and beef supply, variable (and currently favorable) foreign exchange rates, larger carcasses yet a need for portion control, and growing interest by the public in how beef is produced present both challenges and opportunities. Innovative animal and meat science research can identify the types and qualities of beef that a diverse and international consuming public desire. Economic research can determine the relative strength of consumer preferences across types and qualities of beef products and estimate the market value consumers place on identified product attributes. Integrating research efforts will allow the research team to identify product quality attributes consumers demand and estimate what the market is willing to pay for these attributes in a manner that better captures the growing complexities faced by the U.S. beef industry.

It has long been established in the economics literature that both product price and product quality matter to the consumer. Production and process innovations lower production costs and/or improve product quality, which in turn will enhance beef's competitive position relative to pork and poultry. To better understand the relationship in the beef industry between price and product quality, animal/meat scientists and economists need to work together to explore issues affecting beef demand. Analysis of the interaction between consumer preferences for beef based on product attributes, such as: a) consumption quality of beef products, b) quality-enhancing innovations, and c) food safety, with d) market price is key to improving beef's competitive position in the battle to capture more of the consumer's dollar. This type of research is needed if the beef industry is to recapture lost domestic market share from pork and poultry, and extend U.S. beef's international market share.

The past decline in beef demand is a complex issue and focus of ongoing research. Beef customers expect producers to provide a high quality and safe product. Past efforts at improving beef quality generally were built around the concept that there was a single measure of quality. However, quality is multi-dimensional and is viewed differently across consumers, as research done by this research project and other scientists has shown. Consumer preferences change over time due to increasing incomes, changes in taste, and product innovations in beef and competing foods. Additional research is needed on this issue to improve the competitive position of U.S. beef.

Product quality and safety are a function of the U.S. beef production and marketing systems. Therefore, consumer demand is also a function of these systems. Failure of these systems in the past to satisfy consumer preference has resulted in the beef industry losing market share to poultry and pork. Product quality is an issue because much of U.S. beef has been marketed and processed as a generic product, but existing research has shown that variation in generic quality reduces the competitiveness of beef. Beef cattle are genetically diverse, produced under a variety of environmental conditions, which leads to differences in meat quality. The industry might improve customer satisfaction and industry competitiveness by targeting the natural variation of beef to niche markets that are willing to pay a premium for specific naturally occurring product attributes.

With respect to product safety, consumer concern over product safety is the direct result of the beef industry's failure to convince beef patrons that proper safety protocols are in place when product safety issues arise. An excellent example of industry failure was the shock to the U.S. beef market when BSE was discovered in both Canada and the United States in 2003. The Canadian discovery disrupted an important source of imported live animals and beef while the U.S. discovery shut down U.S. beef exports. The beef industry is still adjusting to these challenges and ramping up efforts to identify and trace foodborne pathogens. Traceability, originally conceived to enhance animal and human health, may provide an effective trace-back system to improve the industry's ability to target specific animals to their highest-valued uses and alleviate consumer food security/safety concerns.

The multi-disciplinary research team has decided to focus on beef value at all levels from production through the supply chain to consumer demand. Animal care and health, production and processing, information transfer and marketing, and factors influencing domestic and international demand all affect beef value and thus its competitiveness.